Susan Collins, Claire McCaskill look for tax compromise

Two senators – one Democrat, one Republican – want to get past the recent political bickering over the payroll tax cut.

Sen. Susan Collins (R-Maine) and Sen. Claire McCaskill (D-Mo.) unveiled a package Tuesday that they trumpeted as a compromise – keeping the lower, 4.2 percent payroll tax rate for one more year, and funding it with a 10-year, 2 percent surtax on millionaires and tax break repeals for oil companies.

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The additional tax on the wealthy has generally been a non-starter for Republicans, but Collins and McCaskill think they’ve found a workaround. Their proposal would include a “carve-out” that would exempt small businesses from paying the extra charge – which they’re hoping would neutralize a GOP argument that says higher taxes hurt small businesses.

“We wanted to make sure we were not imposing a surtax on the job creators in this country,” Collins told reporters Tuesday.

“It’s balanced, and it’s a compromise,” added McCaskill.

Aside from extending the payroll tax cut for workers, it also includes a reduced payroll tax rate for companies on the first $10 million of their payroll and a 25 percent tax credit for certain small businesses. It also boosts funding to transportation initiatives.

The package could pave a way toward a compromise, the senators said. But while Collins has spoken with both Democratic and Republican leaders in the Senate, she added: “I don’t want to give any impression that the leadership has endorsed this effort.”

And indeed, endorse it they did not. Later Tuesday afternoon, Senate Minority Leader Mitch McConnell (R-Ky.) told reporters that he wasn’t inclined to back Collins’s effort — as she stood right behind him.

“I am not in favor of raising taxes on working people. I do favor extending the payroll tax holiday for another year in conjunction with job creating proposals,” McConnell said after the weekly caucus lunch, referring to a package that House Republicans will take up next week.

McCaskill had said earlier that she was “optimistic” their bill could garner Republican support — even though most Republicans have vowed never to raise tax rates on anyone, regardless of how rich they are.

Collins, a moderate three-term Republican, was the sole Republican to vote for both the Senate GOP and Democratic payroll tax cut plans last week. Both measures failed.

Extending the payroll tax cut is a major part of Congress’s to-do list in December, and one that President Barack Obama has called a top priority by year’s end. But the two sides in Congress are on diverging paths to pay for it — House Republicans want a pay freeze for federal workers and to cut Medicare benefits for the wealthy, while Senate Democrats prefer a 1.9 percent millionaires’ surtax that would last for a decade.

Readers' Comments (12)

McCaskill is a liberal so far to the left that she is on Bernadette Dorn's party invite list. She is desperately hoping that by pretending to be in the middle of the political spectrum she can hold on to her senate seat. Missouri will not be fooled by this opportunist again.

Forget the millionaire surtax. Apply FICA to total AGI to reduce the rate, eliminate the employer match, make FICA a full tax credit against individual income tax. The millionaire surtax increases complexity by creating a "doughnut hole" between it and the current $106,800 FICA wage cap. This barbell scheme would concentrate the FICA tax burden on the bottom and the top while providing a tax advantage to the upper middle. This policy is subject to complaints of unfairness.

Remove the FICA match from employers and make FICA an individual tax instead to reduce the cost of labor. Stop penalizing self-employed people who pay the full 12.4% rate instead of 6.2% for regular employees. End the incentive for employers to hire fewer workers: employer currently pays $6621 FICA match for one worker @ $200K and pays $12,400 FICA match for 2 workers @ $100 each because of the wage cap.

Make FICA tax a true tax credit against regular income tax (including wages and cap gains) for all individuals. This will increase the take-home pay for the vast majority of working class consumers. Allow low-income wage earners to claim a FICA tax refund to the extent that FICA exceeds their regular income tax liability, up to $1500 - this will encourage people to work for lower pay instead of exhausting their unemployment.

Pay for this plan by terminating the "Earned Income Credit (EIC)" and "Making Work Pay" credit and other temporary tax relief programs (namely the Bush tax cuts). Most important, tax capital gains income at the same rate as wages, without preference - stop the income loophole game playing.

Make these changes permanent so "job creators" - consumers and employers alike - know what to expect.

Go ahead Republicans. Freeze federal pay again, (including military personnel). Don't raise the pittance of a tax increase on the multi-millionaires and billionaires and I promise you I will never vote republican again in my lifetime. And that's after 40 years of voting republican. Go ahead. Keep playing these stupid political games for your wealthy sycophants.

The future of taxation in a global economy will necessitate the carving out of domestic employer income from non-employer income. The plan proposed by Senators Collins and McCaskill is just the beginning of a carve out tax strategy that will solve our fiscal problems, deliver the government revenue we need to maintain the best government on earth, lower unemployment, raise real wages for the poor and middle class, make our economy more egalitarian, rebuild our manufacturing base, and make the 21st century another American Century! How is this all possible? It is because a US employer carve out tax strategy is the only way to raise taxes and simultaneously increase private sectors jobs, and the carve out more than pays for itself. This would occur for five primary reasons. One, very little of the earnings of the wealthy, as well as all others, actually comes from the active ownership of a business that employs in the US. For example, Senator Collins and McCaskill's carve out for all those making over $1 million is only 13% of the total. $1 million level of income is about the point where the highest of these US employer numbers gets. They go lower as incomes go both up and down! Reason two, using the old method of raising income taxes on all of the wealthy, on US employers as well as non-employers, raising taxes on wealthy growing businesses has the effect of slowing the economy to some degree because capital is taken away from growing businesses that would otherwise use that capital to invest in new US jobs. This is especially true coming out of a recession when about 90% of all new jobs are typically created by businesses that are taxed as personal income. Creating a carve out will end this problem. Reason three, without a carve out, US employing businesses have an incentive to close up shop in the US and outsource to foreign countries in order to avoid the higher tax. This is especially true in the US when states raising their income taxes will see employer flight to states that are not or do not have a state income tax. A carve out will end this. Reason four, the greater the carve out is made, that is, the larger the difference in effective tax rates are made between the US employing wealthy and the non-employing wealthy, the greater will become the tax incentive for the non-employing wealthy, or others who want to become wealthy, to find a way to stay or become wealthy by employing fellow Americans. This incentive will greatly increase economic growth and the demand for labor in the US! It is only increases in productivity along with increases in the demand for labor in the private sector that has the effect of raising real wages for the poor and middle class. Reason five, because American voters will soon realize that a US employer carve out tax strategy will not slow down the economy but actually increase private sector jobs, governments will be able to raise income taxes far above where Americans would otherwise let them go. As this occurs, the above reason number four will only become more profound, thus creating a virtuous cycle! Also, the increased tax revenues will help us better adapt to the needs of the 21st century! The best website for learning more about this new tax strategy for the 21st century global economy is, ThirdWayProgressives.org.

The future of taxation in a global economy will necessitate the carving out of domestic employer income from non-employer income. The plan proposed by Senators Collins and McCaskill is just the beginning of a carve out tax strategy that will solve our fiscal problems, deliver the government revenue we need to maintain the best government on earth, lower unemployment, raise real wages for the poor and middle class, make our economy more egalitarian, rebuild our manufacturing base, and make the 21st century another American Century! How is this all possible? It is because a US employer carve out tax strategy is the only way to raise taxes and simultaneously increase private sectors jobs, and the carve out more than pays for itself. This would occur for five primary reasons. One, very little of the earnings of the wealthy, as well as all others, actually comes from the active ownership of a business that employs in the US. For example, Senator Collins and McCaskill's carve out for all those making over $1 million is only 13% of the total. $1 million level of income is about the point where the highest of these US employer numbers gets. They go lower as incomes go both up and down! Reason two, using the old method of raising income taxes on all of the wealthy, on US employers as well as non-employers, raising taxes on wealthy growing businesses has the effect of slowing the economy to some degree because capital is taken away from growing businesses that would otherwise use that capital to invest in new US jobs. This is especially true coming out of a recession when about 90% of all new jobs are typically created by businesses that are taxed as personal income. Creating a carve out will end this problem. Reason three, without a carve out, US employing businesses have an incentive to close up shop in the US and outsource to foreign countries in order to avoid the higher tax. This is especially true in the US when states raising their income taxes will see employer flight to states that are not or do not have a state income tax. A carve out will end this. Reason four, the greater the carve out is made, that is, the larger the difference in effective tax rates are made between the US employing wealthy and the non-employing wealthy, the greater will become the tax incentive for the non-employing wealthy, or others who want to become wealthy, to find a way to stay or become wealthy by employing fellow Americans. This incentive will greatly increase economic growth and the demand for labor in the US! It is only increases in productivity along with increases in the demand for labor in the private sector that has the effect of raising real wages for the poor and middle class. Reason five, because American voters will soon realize that a US employer carve out tax strategy will not slow down the economy but actually increase private sector jobs, governments will be able to raise income taxes far above where Americans would otherwise let them go. As this occurs, the above reason number four will only become more profound, thus creating a virtuous cycle! Also, the increased tax revenues will help us better adapt to the needs of the 21st century! The best website for learning more about this new tax strategy for the 21st century global economy is, ThirdWayProgressives.org.

Why extend this payroll tax cut at all?? What good has it done so far?? The Democrats just can't stand not increasing taxes on "the rich". They will not rest until that's done and they can look at the takers (their base), and say "see how we stuck it to those rich people for you"? And of course, they feel they are securing votes / re-election that way! Obama says he's looking out for the middle class?? Give me a break! He only wants to hang on to control & power.

Obama feels this class warfare is his ticket to re-election and I, for one, am sick & tired of it! This economy will not straighten out until Obama is gone and the Republican prez brings more certainty by repealing Obamacare and lifting regulations that our Community Organizer has put in place. Extending these or any taxes for just one year only adds to the uncertainty . When will it end? When will it be a good time for these politicians to go back to the old payroll tax rules (not renew these cuts)?

Oh, and Claire is just putting on a show for her re-election next year. As far as I'm concerned, she's toast!

Why extend this payroll tax cut at all?? What good has it done so far?? The Democrats just can't stand not increasing taxes on "the rich". They will not rest until that's done and they can look at the takers (their base), and say "see how we stuck it to those rich people for you"? And of course, they feel they are securing votes / re-election that way! Obama says he's looking out for the middle class?? Give me a break! He only wants to hang on to control & power.

Obama feels this class warfare is his ticket to re-election and I, for one, am sick & tired of it! This economy will not straighten out until Obama is gone and the Republican prez brings more certainty by repealing Obamacare and lifting regulations that our Community Organizer has put in place. Extending these or any taxes for just one year only adds to the uncertainty . When will it end? When will it be a good time for these politicians to go back to the old payroll tax rules (not renew these cuts)?

Oh, and Claire is just putting on a show for her re-election next year. As far as I'm concerned, she's toast!

The BIG OBAMA LIE - that the RICH don't pay their fair share of TAXES!!!

The TRUTH:

According to POLITIFACT( a credible source like FACTCHECK.ORG), "America's wealthiest 25 percent pay 86 percent of total income taxes. Wealthiest 5 percent pay 60 percent of total income taxes." A Congressman has said that the TAX BURDEN falls OVERWHELMINGLY on the wealthy in this country and POLITIFACT agrees with him!!!http://www.politifact.com/geor... /> The TAX FOUNDATION, a Washington, D.C.-based think tank founded in 1937 that collects data and publishes research studies on tax policies at the federal and state levels says that the "WEALTHY ONE %" pay more than their fair share (36.7% as of 2009).http://www.taxfoundation.org/n...